State Street Swings To 2Q Loss On Charges, Results Miss Views

State Street Corp. (STT) swung to a second-quarter loss on charges related to consolidation of asset-backed securities as results missed expectations.

State Street shares traded down 1.6% at $48.02 in premarket activity. Through Monday's close, the stock has tripled since it hit its lowest level in more than a decade early this year, but it remains off its 52-week high by a third.

The company, which is the parent of State Street Global Advisors, said in May it was raising new capital after it moved some damaging holdings onto its balance sheet. State Street said the new money would support its tangible common equity ratio, which measures how much of a bank's hard assets its common shareholders actually hold. It fell to 5% in the latest quarter from 5.9% in the first quarter and 5.8% a year earlier.

In the last couple months, State Street has severed all its obligations to the Troubled Asset Relief Program, paying back the $2 billion it borrowed and repurchasing warrants the Treasury held.

State Street posted a second-quarter loss of $3.18 billion, or $7.12 a share, compared with year-earlier income of $548 million, or $1.35 a share. The latest results included $8.16 a share in charges, mostly related to the consolidation of the asset-backed commercial paper conduits onto the company's balance sheet and its TARP repayment. Excluding those items, earnings would have been 79 cents a share.

Revenue decreased 21% to $2.12 billion as servicing fees fell 19%.

Analysts surveyed by Thomson Reuters expected earnings of 97 cents on revenue of $2.16 billion.

Unrealized mark-to-market losses at State Street's investment portfolio fell 19% from the previous quarter.

-By Joan E. Solsman and Kerry Grace Benn, Dow Jones Newswires; 212-416-2353; [e-mail]